State is responsible for its pension mess

December 07, 2010

Jim Hagerty's letter ("State is looking to gut pensions," Dec. 1) relates how the legislature is looking for $400 million in savings from "reform" of the state's pensions systems. Marylanders should know that the state has already reaped billions during the past decade from its failure to meet its funding obligations to active and retired employees and state teachers. Here's how that was done by the Glendenning, Ehrlich and O'Malley administrations with our General Assembly's budget wand:

In its 2001 report, the pension system's actuary stated that the pension systems were in the best condition ever, that "unfunded liabilities were extinguished" and the state's contribution rate was the lowest in 20 years. This came as a result of the state meeting its funding responsibility, investment results better than expected and a reform of the systems in 1980 that provided its retirees among the lowest pensions in the country. But in the waning years of the Glendenning administration, our leaders determined to stop the required funding amounts in a fashion not sanctioned by its actuaries called the "corridor" method. This is when the raiding of the pension systems' assets began.

For the past decade, three administrations agreed, instead of paying for liabilities at annual levels recommended by the actuary, to fund the systems' liabilities annually at the 2000 level, and if the amount paid each year only covers 90 percent to 110 percent of the unfunded liabilities, the next year's state contribution would be adjusted to include only one-fifth of the shortage or overage added to the 2000 figure paid for the next year. With a series of economic losses during the past decade, added to by more liabilities resulting from again reforming the plans for a better benefit formula, the state now believes action must be taken to "repair" a structural deficit problem it has sold to its citizens.

Playing craps with funding its obligations and raising the stakes by increasing its liabilities with additional changes to the pension formulas, the state wants us to believe they are qualified to fix a structural problem they created irresponsibly with a funding trick citizens would like to use for their own mortgages.

Charles Herr, Perry Hall

The writer is a retired state worker.

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